Saving For Your Future
To help people save more for their retirement, all employers are now required by law to provide a workplace pension scheme for certain staff and pay money into it.
All contractors employed by us under our umbrella PAYE model are required to be enrolled into our pension scheme as long as the following criteria is met:
- They earn over £192 per week (or £833 per month)
- They are aged 22 or over and
- They are under state pension age.
You can opt out of the pension scheme if you want to, but if you stay in you will have your own personal pension when you retire. Your pension will belong to you, even if you leave us in the future.
As your umbrella company, we will enroll you into our pension scheme provided by Smart Pension. You will be contacted by Smart Pension providing you with your pension account information.
The main benefit to you asides from saving for your future is that you can use your pension as salary sacrifice to contribute pre-taxed income to your pension. This means that you can pay a percentage of your salary into your pension, rather than paying employers NICs, employees NICs and income tax on the full amount.
What Is Pension Tax Relief?
When you save into a pension, it is usual that the government gives you a top up as a way of encouraging you to save for your future. This top-up comes in the form of tax relief rather than actual money.
Tax relief is available on your pension contributions at the highest rate of income tax that you pay. So, for non-Scottish taxpayers, this means:
- Non-taxpayers (i.e. people who earn under the personal allowance) get no pension tax relief – unless they are in a ‘relief at source’ scheme
- Basic-rate taxpayers get 20% pension tax relief
- Higher-rate taxpayers get 40% pension tax relief
- Additional-rate taxpayers get 45% pension tax relief
You are a higher rate of tax payer, and thus pay 40% PAYE income tax.
You earn £100, which you can take as salary via us as your Umbrella Payroll company, or you can pay into your pension as salary sacrifice.
By taking the £100 as salary via us, your umbrella company, the below deductions would be taken:
- £14.00 will be deducted for employers and employees NI, which leaves a balance of £86.00.
- A further £35.00 will be deducted as higher rate PAYE income tax.
- This means your take home will be £51.00.
If you choose to pay the £100.00 into your pension, then the whole £100.00 would go into your pension fund.
What happens next?
Once enrolled you will receive a welcome pack from the pension provider. Once you receive your welcome pack, you will be able to register and login into your pension.
You will have access to an array of pension services, including the ability to opt out if you so wish.
Once you are enrolled into the pension, we will immediately deduct 8% of your total earnings, which will be paid directly into your pension. This deduction will be clearly detailed on your payslips.
What happens if you don’t want to pay into a pension?
Due to our legal requirement to enrol those who qualify into our pension scheme, we will be deducting the first 8% of your income, once enrolment is confirmed. There is no way for us to avoid this.
If you choose to stay in the scheme we will continue to make your deductions as set out above to grow your fund.
If you choose to opt out, we will receive notification from the pension provider informing that you have decided to do this. We will then ensure that no further deductions are made, and we will ensure that the initial 8% deduction is returned to you, which will be detailed on a later payslip (usually on the third month).
If you have any queries regarding your pension, login, and services, then please contact the pension provider directly using the details provided within your welcome pack/email.
If you have any queries relating to the processes performed by Payments Pro Ltd as detailed above, then please contact your Account Manager.
Payments Pro have partnered with Smart Pension to ensure that all of our contractors are provided with the opportunity to save with one of the UK’s leading pension providers.
Smart Pension use an integrated investment approach to help its members save for the future. As well as this, members can also use a more hands-on approach with their pension investment strategy by investing the contributions in a mix of funds that take appropriate levels of risk. Members may also choose a mix of investments from any of their 17 funds, at any time. Updates on performance are available, 24 hours a day.
The funds Smart Pension uses are managed by fund managers from Legal & General Investment Management, J P Morgan and HSBC. The trustees keep a close eye on all of the fund managers to ensure that members’ savings are invested responsibly and kept secure.
For more information you can visit Smart Pension or download the handy guides below.